Medical Capital Holdings Litigation

In this action, the Firm alleges that defendants Wells Fargo Bank and Bank of New York Mellon breached fiduciary duties owed to investors in Medical Capital Holdings, Inc. ("MCH"), including those who purchased interests in notes issued by Medical Provider Funding Corporation II ("MP II"), Medical Provider Funding Corporation III ("MP III"), Medical Provider Funding Corporation IV ("MP IV") , Medical Provider Funding Corporation V ("MP V"), and Medical Provider Funding Corporation VI ("MP VI") (the "Class"). 

MCH, based in Tustin, California, is a medical receivables financing company that purportedly made its money by purchasing accounts receivable from healthcare providers at a discount and collecting the debts owed. MCH operates through its wholly owned subsidiary, Medical Capital Corporation ("MCC"). MCH and MCC are run by Sidney Field ("Field"), the CEO, and Joseph Lampariello ("Lampariello"), the President and COO.  Since 2003, MCH raised over $2.2 billion from investors, including plaintiffs and other Class members, supposedly to fund its operations. The money was raised through the offering of notes issued by five Special Purpose Corporations ("SPCs") created by MCH: MP II, MP III, MP IV, MP V, and MP VI.  To ensure these promises were kept, investors were told that MCH had retained prominent banks - defendants Wells Fargo and BNYM - to serve as Trustees of the SPCs and to represent the interests of investors. For their work, the Trustees were paid substantial fees. Unfortunately, under the supposedly watchful eyes of the Trustees, MCH was a scam.  

As Pomerantz alleged in its complaint, it is now clear that MCH, MCC, Fields and Lampariello - for years - used the Trustee-controlled accounts as their personal piggy banks, improperly requesting and obtaining investor funds to pay themselves massive "administrative fees" of nearly $325 million which they used to purchase lavish personal perquisites including a multi-million dollar, 118-foot yacht. MCH and its affiliates also invested in an array of non-medical projects that were placed under the personal supervision of Lampariello, including mobile phone and movie ventures, and commingled investor funds between the various SPCs. Despite controlling hundreds of millions of dollars, it appears that MCH and its affiliates operated without financial or accounting controls, failed to prepare financial statements in accordance with GAAP, failed to perform annual appraisals of assets, and repeatedly obtained the Trustees' permission to pay themselves fees based on a formula that blatantly violated the PPMs' mandate that fees not come from investor funds. The Trustees, over and over again, without exception, willingly signed off on the requests.

All five SPCs are now in default to investors, failing to make interest and principle payments on almost $1 billion worth of notes. The Receiver for these SPCs recently reported that of approximately $625 million of medical accounts receivable on the SPCs' collective books, just $80 million is verifiable, and the remaining accounts - totaling $542 million - "no longer exist." Undoubtedly, the noteholders - Class members herein - will suffer substantial losses.

By this action, Pomerantz seek to recover damages for these losses.